A giant IPO on track

A giant IPO on track

The largest initial public offering (IPO) in history seems to be on track. On Friday, the Financial Times newspaper reported that Saudi Arabia is close to appointing the banks that will be lead underwriters on the IPO of Saudi Aramco, the world’s largest oil producer.Two major banks have been identified, JPMorgan, Saudi Aramco’s longstanding commercial banker and Morgan Stanley that is also expected to be a global coordinator and bookrunner on the listing, according to the news report.A third bank, HSBC, is tipped for an underwriting role on the Saudi Aramco planned sale of 5 percent stake in the state-controlled company in 2018. The paper said that HSBC’s name was brought up because of its ability to tap Asian investors due to the bank’s origins in Hong Kong and its longstanding presence in the Middle East.This development is no surprise at all. Saudi Aramco CEO Amin Nasser has pointed out in an interview with Bloomberg’s Editor-in-Chief John Micklethwait during the World Economic Forum (WEF) in Davos last month that Aramco would soon appoint banks that would advise it on theIPO.So in February, it was reported in the media that Saudi Aramco has chosen Moelis & Co., a boutique investment bank in New York, to be its lead independent adviser on the flotation. Moelis is said to advise the company on how to go about the IPO, including the selection of underwriters and deciding issues such as where the company should list its shares.As Nasser said, the banks selection is the step that will come before choosing the market where Aramco will list its shares. The list of potential bourses is too long and diverse from Toronto in Canada to Singapore. The company is also working on preparing its quarterly financial statements for the first time. The statements will be ready this year but will not be available to the public until next year when the IPO takes place. The whole purpose of this exercise is to prepare the company for the flotation and to provide the investors with historical figures to compare future results with.So, is everything almost in place for the IPO? Not really. There are many pending legal and structural issues to be dealt with and a year’s time could be too short or it could be just enough depending on the speed of the team working on the IPO at Aramco. So at the “IPO hive,” people are working around the clock and there is no minute to spare. What Aramco needs to decide on hastily is how it will present the company to the global investors? What assets will be included in the sale? At what tax rate it should be sold to public? And at what value the company should be sold?Aramco’s taxation is still almost the same since the days when it was owned by four American companies. The government obtains 20 percent in royalty fees from the earning and it taxes 85 percent of Aramco’s revenues. At this rate, the cash flow generated from the company will not be enough to lure all the investors. CEO Amin Nasser is aware of this situation and he said in Davos that they were in talks with the government to change the tax regime. So, there are still many things to be done in a limited time. To list Aramco in 2018 is perhaps the biggest challenge for the company.

Saudi Arabia, China sign $28 billion worth of economic accords

A total 35 agreements had been signed at a joint investment forum held by Saudi Arabia’s investment agency SAGIA

Updated 22 February 2019

Reuters

February 22, 2019 12:18

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DUBAI: Saudi Arabia and China signed economic cooperation agreements worth a total of $28 billion at a joint investment forum during a visit by Saudi Crown Prince Mohammed bin Salman to Beijing, Saudi state news agency SPA said on Friday.
It said 35 agreements had been signed at the forum, held by Saudi Arabia’s investment agency SAGIA. It also said four licenses for Chinese companies had been awarded at the forum.

The forum, which coincided with the official visit of Crown Prince Mohammed bin Salman China as part of his Asian tour, aimed at enhancing opportunities for joint cooperation between the two countries in various fields.

Other cooperation agreements signed during the forum included areas of the Kingdom's target sectors such as renewable energy aimed at activating cooperation and consultation frameworks in the field of investment development in wind turbines by manufacturing Electric control devices, wind turbine structures, turbine blades and wind generators with an investment of $ 18 million.

The agreement aims to open up to 800 new job opportunities in one of the most targeted sectors of sustainable development.